Skip to main content
9:00 am
security and medicare. >> they get close to the goal line but they can't score. >> thank you both very much. we appreciate it. both come back soon. that does it for us. make sure to join us tomorrow. good morning. welcome to "squawk on the street." i'm melissa lee with carl quintanilla, jim cramer and david faber live from the new york stock exchange. let's get straight to our top story. a bombshell involving hewlett packard sending stocks down sharply. david broke the story. he has details. >> hewlett packard out with quarterly earnings this morning but the real story is part of that earnings release allegation the company was the victim of a massive fraud when i purchased a u.k. company, $11.1 billion deal that closed in october of last year. hp has taken 8.8 billion write-down on autonomy and 5
9:01 am
billion due to serious improprieties and misrepresentations and disclosure failures that occurred prior to its purchase by hewlett packard. in other words, it's fraud. after autonomy's founder and ceo michael lynch was fired by meg whitman, sources close to the company tell me a senior executive from autonomy came forward with evidence of widespread accounting misrepresentations that occurred before it was bought by hp. hp began an investigation and concluded that these accounting improprieties inflated the value by $5.3 billion. the ceo then relied on audited financials when making a bid to buy the company. those financials were audited but there were plenty of investors out there who questioned autonomy's growth rate. sources close to the company allege that autonomy pursued a number of avenues to make margins, growth rate and overall value appear far higher than it
9:02 am
actually was. the company was selling computer hardware. desk top computers, it's a software company at a loss to supplement revenues and then taking the cost of that as a marketing cost so gross margins would not be impacted. they will sell it directly. you want to sell it to original equipment manufacturers giving it the appearance that they had strong growth. finally, sources close to the company tell me the investigation conducted for hp by price water house coopers found it was getting customers to pay a high up front licensing fee in return for showing them large fees over time for hosting services. again, making license fees look much better than they otherwise had been. all of this to make margins look better. they were as high as 45%. they really were closer to 28% sources tell me. hp has now created a baseline
9:03 am
pro profitability at the unit aware that the organic growth rate paying over 11 billion at cash was nowhere near what it appeared. hp referred the matter to the s.e.c. that having taken place i'm told only recently. perhaps as recently as the last week or so. guys? >> wow. >> just a shocking story. >> as shell games go, how sophisticated was this shell game? is this something you could expect your every day auditor to find? >> that's a really good question. i always go back to that famous conference call saying fraud by its nature is hard to detect. people were asking the same question. how could you not have known. by the way, back then to take you back quite a ways, you see there were revenue recognition issues. that's what we're talking about here largely. but that being said, there were a number of short sellers who looked through the numbers and had a lot of questions when autonomy was a public company. >> having testified on behalf of
9:04 am
the government in the prosecution of the cfo, that's where bogus companies -- there were bogus companies involved. this is a real company. i'm listening to all of the things you said and i could see, wait a second, hewlett packard, well, sun microbought by oracle gave away the hardware to sell the software. they lowered gross margins by doing it. if you want to get a big up front price for a piece of software and then do back end and lower as long as you divide it by 12, that's real too. i'm hearing that it's entirely possible that that business model that they did is not fraudulent but that the numbers involved were fraudulent. people do this. >> they do it legitimately. >> margins are killed by sun micro. >> they don't give money to resellers to buy a product. >> that's a kickback. that's a lazy susan kickback.
9:05 am
i'm so old. i've seen lazy susan deals where you give it to me, i give it to you, you give it back to me and i give it to you for revenue. government doesn't like lazy susan transaction. >> i'm a shareholder of hewlett packard. someone out there is a shareholder looking at a stock at ten-year lows at this point. you want to find out who's responsible for whose eyes were the wool pulled over. >> many wondered where they paid so much money for this company. unstructured data company. hewlett believe the company's technology is very strong. >> really? >> not near worth what they paid for it. many people wondered what is he taking a shot for autonomy? hewlett packard suffered the
9:06 am
minute they did that deal. and he followed it up by saying we'll split the company in two remember. >> maybe that would have been part of autonomy you would have taken over is hardware. this is an extraordinary story, people. extraordinary. major american company that's really just in our -- just disintegrating. they did cash flow. what line in that release was positive? >> printer volumes down 22%. do you think that's positive? netbooks down. then you hear about this accounting -- >> except cash flow generation. that's what you point to. people worry about hp. they reduced their amount of death. >> gave back money to dividends. >> they generated over $10 billion in cash. >> how long can you do that when you have that decline? when you see jcpenney or radio shack or best buy -- >> they generated more cash this
9:07 am
quarter than they did a year ago. >> eventually they'll have no business and the cash flow will be huge. >> it adds to the long series of embarrassments. the ap takes a crack at this. they mention eds. another big write-off from the previous quarter. they say hd blamed the results not panning out as expected. the number of small bad decisions that have led to something like this only this company could have this happen to them. >> this company suffered so many different lows whether it be the exit from the company. listen. this is a great american company. >> autonomy is a tiny percentage of the overall revenues. >> 300,000 people worked there. >> since the day they announced autonomy acquisition, it's down 70%. it could be pointed toward the reason behind the stock decline.
9:08 am
>> people knew and wondered about their strategy when he did that deal. what are you becoming as hp. meg whitman has taken the company in a different direction. she's been at the helm for over a year. they says this will be a long-term turnaround. those that believe in it will be akin to what happened at ibm which took many years to accomplish. we'll talk to meg an hour and a half from now. >> her bonds are -- the company's bonds trading up since she came in. bonds were getting hit. people worried about the credit rating. these bonds have been resurrected. that's important. i'm trying to put a positive -- put lipstick on this. >> what i find interesting about this story is you remember mike lynch, the man who ran this company and founded it was at hp running and men meg fired them after they had significant underperformance. the reason is they had to change the way they were going about
9:09 am
accounting everything. >> why stick around if he knowledge that any fraud was going on? why would he and so many other execs stay on? >> that's a good question. we don't know the answer. we've seen mr. lynch listening in on the conference call that hp is having and perhaps we'll be able to get to him. >> do you think he would come on the show? >> he might. defend himself. >> he expects to comment on it later on today. >> meg whitman -- >> there will be pushback against hp's contentions. they don't use the word fraud. i use the word fraud. it's a sharply worded statement from them that says we were completely taken advantage of and you guys made stuff up. >> put it in context. you have covered the great frauds. this is a huge one. >> it's a big number. >> maybe not enron or worldcom but maybe nortel. >> maybe sunbeam. >> chainsaw with -- no. you're talking about the warehouse full of grills that
9:10 am
didn't exist. >> did they exist? >> came to my office with sunglasses on. never trust a man with sunglasses on indoors. >> never took his sunglasses off? >> i never trust someone like that. >> bono is out in that case. at least there he has rose colored glasses. >> i don't know if he had a light problem. we don't know. >> when you get to fraud, you got to just sit back and say is there anything at the company? there obviously are things at the company here. the stock is telling us that those things are worth little. the stock is incredible. >> as jim says, the shares are in fact weighing on the dow futures this morning a day after the 207-point rally sparked by hopes that the president and lawmakers will reach an agreement on the fiscal cliff. both the dow and s&p posting their biggest gains in two months. nasdaq recording the best day since july 27th. talk about volatility, we've had seven triple digit moves on the dow this month.
9:11 am
i think for the month of october we had five. three in september. two in august. things are getting more and more volatili voluatile into the end of the year. >> yesterday there was hope the president has something going fiscal cliff wise. you get that thing going it transcends a lot. lowe's was good. home depot. did you see housing numbers today? something good is happening in the country. we got something good going in housing. good in autos. these are very strong numbers despite sandy you get a good read away from -- >> congress was out on friday and president was begun on friday and we didn't have massive rally we saw yesterday. >> we had option expiration. i think the idea that he's talking to people who have been -- the idea that the white house is talking to business people and let's say you're boeing. you got a lot of congress people that you could call and say, listen, this is real bad for us. we're the ones getting hurt. do you remember your roots,
9:12 am
republicans? you're pro-defense. want to raise the defense budget. by doing this you'll cut our defense budget. the democrats did flip on a lot of things that republicans have got to be worried about. this is not just -- the defense budget has always been championed by the republicans. when you see boeing get the call, honeywell is laying off people already in defense. you got real issues here for employment not just increases for people and taxes. employment. can't have that go down. >> people may not believe that it was the rise above rally. whether or not you believe it was rise above it 200-day moving average on s&p 500. we did reach that key technical level in yesterday's rally. whether or not you think it's because of kumbaya feelings between both sides on the fiscal cliff or not, technically speaking we're in a better place than we were yesterday. we'll have to see this reaffirmed by another couple closes. >> how about apple? >> apple massive rally. massive rally. >> there must have been people
9:13 am
at 505 pressing in on the short side. think people at apple are laughing? i feel like i should take the pc and throw it out. what do i got, hewlett? >> and then you have a dell. >> punch line, yeah. hewlett packard. >> let's talk about best buy. we're talking those shares fall in premarket trade excludeing items the electronics retail chain reporting well below street estimates which stood at 12 cents a share. revenue above forecast for same store sales falling 4.3% in the quarter. best buy ceo calling his company's q-3 numbers clearly unsatisfactory and the thing in the press release that jumped out at me is revision lower and sharp revision lower considering the last guidance was in august. >> we thought it was 1.25 billion. if you're an investment banker, you're looking at cash flow. that has got to be maybe you
9:14 am
rethink this thing. >> this thing generates a lot of cash. if you are a pe buyer, the reason you are remotely interested is because best buy still does generate a lot of cash. of course you need it to generate a lot because it will generate less and less or at least you have to anticipate that if you put a number in there in terms of evaluation. let's take it from the high of what they were looking for just a couple of months ago at 1.5 billion and let's assume now the low at 850 million. whoa. whoa. if you are sitting there and you are one of the three firms looking at this thing, you got to be going, okay, let's do a little rethink here. not that you're necessarily not in there. but what's the right price if you decide you want to be. >> unfavorable product mixing mobile phones, televisions, impact product transitions. this back thursday, wednesday, tuesday, monday, whatever they made it because it seems to happen every single day, when i was out yesterday it was like
9:15 am
black monday at nordstrom's. >> the whole day i didn't shop once. >> this is the season of the 60 incher and in the end they're going to give you a 60 inch to buy one get one. i mean -- >> let's hope for poor people sitting at best buy right now -- >> those people are paid actors. how much does it cost. give me five people in a tent. >> i never thought of that. we're talking about it now. >> of course they're paid actors. >> hired by best buy is that what you're alleging? >> would you do that? >> that would be a mischaracterization. >> i'm just saying if i were running a retailer that sold 60-inch tvs, i would -- >> that would be a misrepresentation is what that would be. >> i would get tents. go to eastern mountain sports. they have recreational equipment. you rent them. >> if they aren't doing it, they should be. >> you can get those occupy wall street people. >> just line them up.
9:16 am
we have ten people everywhere. wow. 60 inchers. >> when we come back, as david mentioned in the next hour a live interview with hp ceo meg whitman. the accounting bombshell the latest challenge she faces in her efforts to turn that company around. 10:40 a.m. eastern time. one more look at futures. took a hit on the hp news. we'll see what the effects are when the trading day begins in just about 15 minutes. [ female announcer ] the power to become a better investor has gone mobile.
9:17 am
with features like scanning a barcode to get detailed stock quotes to voice recognition. e-trade leads the way in wherever, whenever investing. download the ultimate in mobile investing apps, free, at e-trade.
9:18 am
9:19 am
let's look at futures. hewlett packard waying iweighi dow jones average. down two points. straight ahead, a first on cnbc interview with hewlett packard ceo meg whitman which you won't want to miss. much more "squawk on the street" live from post 9 straight ahead. ♪
9:20 am
9:21 am
[ female announcer ] today, it's not just about who lives in the white house, it's about who lives in the yellow house, the green, and the apartment house, too. today we not only honor the oval office, but we honor the cubicle, and the home office as well. because today it's about all of us. and no matter who you are, you're the commander-in-chief of your own life. ♪
9:22 am
about eight minutes to the bell on this tuesday morning. let's get jim's mad dash. >> okay. here's the thing. this is a heavily shorted stock. obviously the time to short it was right here. they appointed transition end of the year and executive mr. brian kelly. frees coca-cola. suddenly you have a company that people are saying -- some people would argue is sketchy to use my 21-year-old daughter's word. you bring in a guy from coca-cola. best run beverage company in the world. i think the shorts are -- before twitter he was just herb greenburg. he'll have words to say. this cut a lot of people short. i warn people the time to go
9:23 am
short was a long time ago. the range has been up, not down. >> kelly has been talked about as a potential successor. >> i thought he was the up and coming guy at coca-cola. no matter what you think about it, anyone from coca-cola is better than anyone at green mountain. >> well put. >> now, also intel speaking of the successions. ubs downgrades intel. look at this. you got a stock that's a very high yield. every single commentary. there wasn't a single positive word about it other than he beat amd and always mentioned that he's lost out on the mobile wars. i struggle for a reason to own intel. they are so smart. there's got to be a reason in there but in the meantime i look at hewlett packard's pc numbers. >> andy bryant telling the journal no reason to change strategy. >> go by arm holdings already. >> when we come back, pc blues and now an accounting scandal.
9:24 am
can meg whitman reinvent hp. she's coming up at 10:40 a.m. eastern. one,
9:25 am
olaf gets great rewards for his small business! pizza! [ garth ] olaf's small business earns 2% cash back on every purchase, every day! helium delivery. put it on my spark card! [ pop! ] [ garth ] why settle for less? great businesses deserve great rewards! awesome!!! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? throughout our lives. one a day men's 50+ is a complete multi-vitamin designed for men's health concerns as we age.
9:26 am
it has more of 7 antioxidants to support cell health. one a day men's 50+. [ male announcer ] this is steve. he loves risk. but whether he's climbing everest, scuba diving the great barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesn't nickel and dime him with hidden fees. so he can worry about other things, like what the market is doing and being ready, no matter what happens, which isn't rocket science. it's just common sense, from td ameritrade.
9:27 am
we've got what could be a very big day here on the markets. will we or will we not confirm this big move that we've seen over the past two days? we did have housing starts four-year highs for the month of october. ben bernanke speaking to the economic club of new york at 12:00 noon today. that's something to watch on the markets. we mentioned this 200-day moving average in the s&p 500 and the huge move we saw in apple which helped the nasdaq as well. >> i see a lot of housing stocks inching up. that theme continues. apple, one of the things i liked about apple is that was a classic island reversal. went down a lot. i don't like up openings. apple had one yesterday. has one today. you could argue that if you go over line by line what's
9:28 am
happening at hewlett packard, apple is taking giant share. we all want razzle dazzle from apple. we don't want three yards and a cloud of dust. it's four yards and a cloud of dust and first down on the third down. >> unless you're the philadelphia eagles in which case it's three and out. >> you shouldn't do that to him. >> i root for the 49ers. how about my father on sunday saying why can't you just be a fan of the giants? why can't you? it's an interesting moment. >> the journal today weighing in saying all you jets fans at least you're not the eagles. >> hi to retweet your tweet. i'm the tin man. thank heavens there's nothing there. >> rimm gets an upgrade. jeffries goes to a hold. they did a survey of major carriers that the blackberry 10 is being received better than they thought. they are puzzled. they say why would someone like a phone that's two years later.
9:29 am
theory is that carriers see it as the last chance to avoid an operating system duopoly. one more player in the game. >> the question is whether they will be able to. when you ask those that run verizon or at&t whether it's going to be a survivor, they are very coy on that. certainly anticipating an android world doesn't benefit them. the phone makers also or larger issue makes you think about verizon and at&t themselves which they don't like to hear. but they are. >> rimm stock has been a winner lately. you have to admit that. it's been good. >> you like to point out that last time this particular analyst upgraded the stock, that foreshadoweded a 40% move in the stock. we have peter on later on in the show. >> his target is only ten bucks. doubles from five.
9:30 am
>> all right. here we go. opening bell is ringing on wall street. here at the big board, executives of an israeli company here for a conference and city meals on wheels providing 2 million meals a year for elderly and homebound new yorkers. a great cause there. all right. here we go at the open. a lot of red here. hewlett packard's conference call is going on right now. they are talking about things like -- >> i think it just ended. >> they'll have a number of calls including a media call and a u.k. media call, i believe. that will be interesting given where autonomy was based and then we'll speak exclusively to meg whitman. >> that all happens before 10:40? >> that will happen between now and 10:40. >> it does seem like a moving target when you go over it line by line. this quarter will be better than next quarter. >> that's not good. >> no. i struggle. i struggle on that cash flow.
9:31 am
you can't have your business go down, down, down and be able to cut costs to the point where you can make money eventually. you can't. >> it's a $22.7 billion market value. they generate $4.1 billion in cash this quarter. >> do you think oracle should buy them? i'm serious. >> i'll tell you something -- >> i will not be facetious. can we do a private equity deal? is it possible? they have a decent amount of debt. >> a lot of it -- >> i'm being facetious. free cash flow generation is what they'll be focused on. >> right. >> it's only twice what they generated in the last year. >> you can hear them saying that someone at oracle has a big consulting business. i brought it in. they merged it. we spin out hardware. we throw in hardware with it. you have a company that could be
9:32 am
worth something. they could fire a couple hundred thousand. don't want people to be fired. don't get me wrong. don't want to be -- >> that's a lot of people to fire. >> it's going to be rumored. >> you're doing both stories. it's the value story and value trust. >> i don't think you should recommend a stock on basis of takeover if fundamentals are faltering and fundamentals away from cash flow are faltering and when you get these declines, she has to stay one step ahead of the posse at all times. >> you also said that accounting troubles scare you more than anything else. does a this count in this case. >> not accounting troubles -- >> this is not worldcom. there was a merger. remember walter forbes. he wasn't your friend, was he? >> no. >> is it enough to say that previous management bought it and bought the accounting issues
9:33 am
or as a shareholder you say at the end of the day the board approved the deal and board took in those reports and said okay, we'll go for it. >> the board here is probably -- it has been known as the worst board of every major american company. >> the board has changed a lot. >> yes. >> it's the same board largely now it was that approved this deal except one was not on the board, ralph. how is the board -- it's important for a board to know about accounting improprietaries. >> it is hard to discover fraud. chris christie asked me to testify on behalf of the people of the united states. the company told me the day before the fraud this is the strongest we've ever been. i don't know. >> you want to blame the board, you blame them for hiring that guy. that was a disaster. >> true. >> made $25 million for about 11
9:34 am
months work. >> not bad for him. >> helped to completely ruin the company. >> it was a great company. these were titans. >> it's not over yet. >> we've living so long with hewlett packard being a bad company -- >> it's not over yet. >> what are you second act american? are you going with some sort of -- >> i'm going to rise above. >> great. fine. >> it's amazing how the news has really overshadowed other big stories. on another day we would lead with jpmorgan's new cfo. >> we knew potentially doug was going to step down after dealing with a lot of fallout from the london deal. that was not related to. i think he was ready to try something different. they elevated so we've got her and of course morgan stanley so two of the most senior women in the financial services industry,
9:35 am
both cfos. >> i thought this was -- he took this thing, jamie dimon, and he did in his own way just say, listen, if you were involved in this thing, if you touched this thing, it's going to be difficult. that's how i look at it. i look at it 30,000 feet saying he had a major error and did what you want him to do which is say everybody who touched this, you're not welcome. i feel that's what he did. i think that's what he did. >> at the end of the day that does appear with what's more or less what's happened even though who were related. cfo at the same time didn't report directly. >> textbook. i was critical of the way it happened. textbook in the way of getting behind it and deciding anyone who had a handle on it -- i'm sure someone says why didn't he quit himself? i don't believe that he knew this. i don't think -- i think you can again do a lot of things and you get the documents and the run
9:36 am
and the run is not true but you believe the run because you've always believed the run. >> i want to point out a big move that we have in groupon. it's up by almost 13% after tiger global announced 9.9% stake in the company. this came out last night. it's a passive stake, not an active stake. still tiger has been involved in investing early on, early stage invest areas in a lot of these names linked in. facebook and now groupon. >> clearly not too early. >> it was not too early. >> if you love groupon, you haven't really missed that much of a buottom. people will say i have to get in there. i don't know. you need -- anything is possible. reverting to your analysis of hewlett packard, maybe groupon, the beginning of the big turn. >> the day is here. >> bring it on. >> or maybe not.
9:37 am
>> it's down to a level where if they can figure it out, amazon -- i remember for years amazon was regarding -- never mind. i was going to put amazon in the same sentence as groupon. >> don't do that. >> let's get to bob pisani. he can save us on the floor with what's moving. good morning, bob. >> the important thing here today is i'm getting excited about housing. it's been building for a while. we all say there's a housing recovery. everyone is holding their breath waiting for some very clear trends to start emerging. home building companies moved ahead of this. overall industry has been very mute on this. now we're getting the numbers. they're coming in. this is a real housing recovery. home builders this morning were up about 2% as i was coming down the stairs. housing starts numbers best since october 2000 and 894,000. we're starting to approach the important psychologically important 1 million start levels. that's where you will see a lot of building materials companies,
9:38 am
the guys who make sheet rock and drywall, that's where they will ramp up production levels because a number of them said we want to see clear evidence that housing starts are in an upward trend. you get near 1 million, they'll start increasing factory production because a lot of stuff like sheet rock, they held back production because numbers have not been titanic recently. now the trend is really happening. look at what's going on here. starts year-to-date up 28%. permits, year over year, up 30%. those are real signs of improvement here. i think we'll talk more about that in the next hour or so. i'm getting excited and encouraged. not encouraged about best buy. best buy is a $12 stock. t this was a $20 stock back in august. you guys talked about this. precash flow revised lower. buybacks suspended. disaster margins declining. look at same store sales
9:39 am
numbers. the heart of the company, consumer electronic, down 8.4%. services, down 4.6%. the only thing that increased, the only thing that increased was appliances. mobile phone sales on the flat side. apple and amazon cut into their sales. other promotions by discount clubs are taking market share away from them. maybe there's a chance that someone could come in and buy it. i guess people are still talking about it. my bet would be they will sit around and wait for prices to drift lower before anybody actually comes in at this point. finally a comment on a story that was yesterday that i think was not reported enough. honeywell came out and said forget about sequestration. the cuts are coming in defense whether we have sequestration or not. honeywell said they thought 80% of sequestration cuts would come regardless and that people should get used to that fact that there will be less spending in defense. 80%.
9:40 am
bottom line here is, folks, get used to what's going on in defense. also, regardless of the fiscal cliff there's cuts. the u.s. government is the world's biggest buyer of software associated with the running of any kind of government. that's another kind of corollary here. a big comment from a lot of people in the defense industry about that yesterday. i think they're the first company to come out and make realistic expectations of what will happen in the next couple of years. back to you. >> okay. thank you. dave cote is the head of the curve on all of this. let's shift to bonds and dollar. rick santelli at the cme group in chicago. rick? >> thank you, jim. everyone is excited about good housing numbers. everybody but the fixed income market. everybody but the equity market. i know there's an hp issue here. however, let's look at the charts. let's put up a two-day chart of tens. clearly you can see we're up
9:41 am
about a basis point on the day. if you look on the right side of the chart and look around 8:30 eastern, you can't pick out that we had a good housing number. if you really switch this around a bit, you look at the shorter matures, you could almost argue that there's a fed implication here small at best. something else happened yesterday. france lost aaa rating. when we lost our aaa rating, everything rallied. it isn't necessarily true with france. now, let's start with the currency. if you look at a two-day chart of the euro, you can see there's very little movement there on a two-day which gives you a nice glimpse that it was virtually unaffected. let's look at their own backyard. look at a two-day chart of two year trades. they are up. let's look at their ten year. i think this is an important dynamic to pay attention to. it's about relative ratings. what investors say is really
9:42 am
what matters. they're obviously squawking a bit more about the french downgrade than they did about the u.s. downgrade. they have france at this level and u.s. already lost aaa just seems logical at best and one final note, if we continue to monitor the treasury market, let's not forget that we do have a tips auction tomorrow. 13 billion. back to you. >> thank you so much. now, energy prices pulling back after monday's gains maybe some peace talks in the air. let's go to sharon epperson at the nimax. >> a bit of a pullback but keep in mind we saw oil prices settle at one-month high yesterday and we are looking at a slight retreat after nearly 3% gain across the complex. the energy complex in yesterday's session. we're still watching what is happening in israel and gaza. the conflict there and uncertainty remains. focal point of many traders. the reason why perhaps we're not pulling back even further although many are anticipating we are going to see an increase in u.s. crude oil supplies when the energy department reports
9:43 am
its numbers tomorrow. we'll monitor israel's situation because that's likely to have a very important effect on the oil price in this session. gold continues to trade in a range here. ubs saying there needs to be a significant breakout in this range for oil to have true momentum and on this short holiday week, it appears that many traders are just trying to cover their short positions and not really taking out new bets a at the moment but there are some taking out significant bets and there have been reports that george and john have added to their gold holdings. we have reported that gold etf holdings are at record levels. there are many that want to be in this complex but of course still right now we are looking at a slight pullback in the gold price right around 1730 an ounce. >> sharon epperson thanks for that. hewlett packard didn't have it. regulators didn't have it. one famous investor did. find out who we're talking about. that is next. plus, hewlett packard shares now sharing at decade lows. we have an interview with ceo meg whitman and we'll ask her
9:44 am
about the outright misrepresentations at autonomy which is pulling stock down as we head to break look at this morning's early movers. a lot of home builders on housing starts numbers. they are trading higher in today's session. having you ship my gifts couldn't be easier.
9:45 am
9:46 am
well, having a ton of locations doesn't hurt. and my daughter loves the santa. oh, ah sir. that is a customer. let's not tell mom. [ male announcer ] break from the holiday stress. fedex office. part of a whole new line of tablets from dell. it's changing the conversation. ♪
9:47 am
>> dow is off 50 points. hewlett packard, biggest weight on the dow right now down by about 12.5%. these are lows that we have not seen since october of 2002. ten-year lows on hewlett packard. bright spots on the dow at this hour. home depot for one trading higher by 25 cents a share. carl? >> the slump in hp shares has one prominent investor saying i told you so. herb greenburg is back at hq with details on that. a victory lap for those shorts. >> while chatters of fraud at autonomy may have been a
9:48 am
surprise to hewlett packard, it wasn't to short sellers. one said this morning that in early 2011, autonomy was his firm's largest european short and autonomy is what led him to short hewlett packard. >> the reason we got interested in hewlett packard because of one of our biggest positions was autonomy. hewlett packard bought the company for $11 billion. the accounting was dreadful. a disaster. they did almost no due diligence on the deal. it close quickly. oracle was shown the deal and passed. within seven months the ceo and a number of its top people all left. >> it is the presence of his autonomy research which is worth noting here. a report by his firm in july 2009 ticks off more than a dozen concerns, many of them focusing
9:49 am
on accounting such as claims about the size of its e-discovery business are questionable. autonomy's claims of 20% growth in revenue are inconsistent with competitor's reported figures. level of financial disclosure is very poor. it has created a significant cookie jar of earnings. he even questioned whether the chief operating officer, a former junior mergers attorney was qualified for the role. what this really gets down to is the old issue. why is it the shorts see it first on many occasions and so many others including the company do not? i asked this question over and over year after year and no one seems to have a great answer. >> you know, herb, by the way, that was the greatest marketing pitch i think i have ever seen just there. not that it wasn't well deserved. >> he did not call me on this.
9:50 am
i recalled this and got ahold of him. >> you have worked your share of frauds. that's for sure. tell me what your sense is here in terms of signing off on these financials and are they or should they be a focus here? >> why have auditors been sort of turning a blind eye in many of these deals especially when you had had a prominent short seller raising red flags. i'm going back and just thinking that a good question is whether there is authority over auditing the auditors in the u.k. this is a u.k. firm. there are issues around the world with that auditing issue including china. >> herb, did he say anything about what he's doing with hewlett short right now? >> no. we were just going back and forth and in e-mail. he's out of the country. >> that would be key here. >> it would be key. it would be key but he's not easy to get ahold of here. >> i understand. it's hard to get in touch with him sometimes. all right. thank you. >> sure.
9:51 am
>> always good to tease jim and tell him he's buying drinks today on days like today where you wonder if he's covering or not. in 2 1/2 hours from now, ben bernanke set to give his first major speech on the economy since the election. economic club in new york at 12:15 eastern time. coming up, the message you might expect from the fed chairman. first -- >> coming up, during this week of giving thanks, we're thankful for jim cramer and his six stocks in 60 seconds. find out why when "squawk on the street" returns. le announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying...
9:52 am
[ all ] i'm with scottrade.
9:53 am
9:54 am
six in 60. i don't know how we'll get it down to just six given corporate news. >> during this period where companies came public, almost all were bad. the luggage company is doing well. >> nice upgrade of whole foods today. >> goldman goes positive on it. the stock has been marking time since last quarter. this is a huge seasonal period.
9:55 am
>> wells likes coach. >> everyone wonders when coach will come back to life. i think this upgrade may signal that china is good for them and domestic is good for them. >> expedia barclays upgrade. >> it's integral to the travel business. nice performer. >> icahn buying more chesapeake. >> he values his commentary but the stock has been a dog. >> and tonight you're going to have sales >> maybe the most controversial company. a big cloud company. sells at high mobile. let's see if he delivers tonight. >> nicely timed. he might have some thoughts on hp. >> yes. i think he will. i think he will try to do it. you're going to get it. what i do -- he's made a lot of acquisitions. how do you gain on an acquisition? autonomy, a lot of people said it was no good and yet where was
9:56 am
the company? what happened? i don't know. i'm dazzled by what happened this morning. a big news day. huge news day. >> we haven't really talked about what the fed chairman may say later today or the rally yesterday and whether it changed your pessimistic tone. >> i just think that i need to see movement. i saw pelosi negative and patty murray negative and mitch mcconnell not budging. i would like to see one republican and one democrat who have been against compromise coming out today and saying we're compromising and then you've got momentum and you'll get a deal done. i have not seen that yet. >> feel better that we're above key technical levels? >> i think yesterday's rally apple really does help. yesterday's rally was a recognition that housing is still good and autos remain good. europe is not good. we could have spoke about the french downgrade. we need to see momentum on fiscal cliff talks or we won't
9:57 am
have the day that we had. >> have great thanksgiving. >> whole foods thanksgiving at my house this year. enough already with the cooking. enough. i'm doing the heating. >> enjoy, man. >> thank you. >> we'll see you next week. when we come back, the challenges of turning around hp have become more complicated. we'll talk about them with meg meg and david faber has that interview and best buy has spoken on earnings. it's a miss. what's next for the struggling retailer and can the holidays come to the rescue. we're back in a minute.
9:58 am
or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series from brother. easy to use. it's the ultimate combination of speed, small size, and low-cost printing.
9:59 am
then don't get nickle and dimed by high cost investments and annoying account fees. at e-trade, our free easy-to-use online tools and experienced retirement specialists can help you build a personalized plan. and with our no annual fee iras and a wide range of low cost investments, you can execute the plan you want at a low cost. so meet with us, or go to for a great retirement plan with low cost investments. ♪
10:00 am
let's get back to big news of the morning. involves hewlett packard. the company did report earnings and not being particularly well received on the numbers themselves particularly the outlook but of course it is charges of accounting issues prior to when hp bought the unit
10:01 am
has brought the attention of investors. hewlett packard has taken a $5.3 billion write-down on its autonomy unit. it paid 11.1 billion in cash for the company. that deal closed in october 2011. done under previous management. there is the overall charge of 8.8 billion. you haven't really explained there's an additional $3.5 billion charge related to good will impairment trading above the implied price of the so-called good will. that charge was in addition to the 5.3 billion. they have taken $8.8 billion write-down. not one of the worst deals of all time but it is certainly up there in terms of the disappearance of value in a very short amount of time. you see talking about
10:02 am
disappearance of value. another 13.5% decline this morning for hewlett packard. sources close to the company may have confirmed many things we first reported this morning namely that an investigation began in lay may after former management of autonomy was tossed out by hp ceo meg whitman. and what is alleged? they commence an investigation when the high ranking employee at ougautonomy after the leaderp said we were doing things you should take a look at. what were those things? we had customers paying high up front licensing fees in return for giving them low fees over time. we paid resellers. we gave them money to pay us back to pay us to buy our software and to make it look like we had a lot of demand from original equipment manufacturers. we did not. we were selling desk top computers and other hardware at a loss but actually taking the cost of sales as a marketing cost so it wouldn't impact gross
10:03 am
margins. any number of different things come under this broad headline. i have called it fraud for my reporting this morning. the matter referred to the s.e.c. and to serious fraud office in the u.k. remember autonomy was a u.k. company. as reported this morning, there were any number of short sellers out there that looked through autonomy's numbers when it was a public company and had many questions about the way it went about accounting for revenues and recognizing revenues. that did not stop former management from paying that enormous sum. a huge premium for the company and now of course a problem that they'll be dealing with at hewlett packard for quite some time to come it would seem. courts will deal with this. regulators will deal with this. we have yet to hear from former management at autonomy to see what they have to say about these allegations. >> i tell you what, one thing is for sure. this has moved the bar by which "bad" ceo and "bad" deals are
10:04 am
judged. if this comes to be the way that hp alleges. it's not an aol/time warner and not a countrywide but it was a bad deal. it wasn't just the deal itself but it immediately impacted hp stock price at the time it was done because people questioned the strategy which they had a right to and he was out the door not very long after. >> strategy and premium to the shares. multiple was in question at that time. the stock was down about 70% since then. obviously there are a lot of other things going on. secular decline in business doesn't help either. certainly this is going to -- this is one thing that put that company on that track lower. you can see the stock moved down. that big drop that we saw in 2011. >> do their own methodology to come up with a number they believe would have been an appropriate price to value at the time of the acquisition when you assume what real margins were and not margins they were
10:05 am
slowing and real growth rate was not the growth rate that they were showing due to what hp claims after it was investigated serious misrepresentations. >> the next leg in the story is what happened with those reviews of the company and why did they miss it? >> is it clear to you if the new numbers are right, would they still have written down something today? >> they would have taken the write-down, the goodwill $3.5 billion write-down as they did with eds not long ago. that's a goodwill impairment. that would still have been taken. >> fascinating story. we'll talk with it all day long. hp far and away the worst performer on s&p 500. the 200-day moving average got crossed yesterday. what are technicals saying about this market. mark joins us here at post 9. welcome back. good to have you. >> thank you. >> you think in the near term the trend is up. >> i think yesterday's surge was
10:06 am
a step in the right direction to thinking that equities are making a short-term bottom. we surged almost 2% with decent breath. equities back to overbought territory and that coincided with reduction in uncertainty that coincided with this entire move since mid september. as you remember, we peaked at the mention of qe-3 and equities have been down 7% in the last couple months. we've got down to levels that are important technically and now we're starting to show signs of stabilizing. we're seeing big moves up in groups that lagged by technology and materials over the last few months. this is at least a short-term positive heading into one of the seasonally most bullish months of the year. >> you see signs that tech might be bottoming out at this point? >> i do. at least on a short-term basis we see signs and obviously apple compromising such a big percentage of the ndx and a big move yesterday and nearly 7% one of the biggest moves we've seen. >> isn't that convincing in your mind? >> it is. it had gotten a bit overdone.
10:07 am
we are down to levels in may lows so when you see a big move on big volume it may take backing and filling but my thinking is that we can move higher in the next several weeks in this stock and getting to 590 and over 600 before we stall out once again. >> you think the broader market retests the october highs? >> there's a decent chance that happens in terms of getting up to levels in mid september. we may need backing and filling over the next week or so. in general prices are down to a level of price and time where i expect to see rallies in the next four to six weeks in december and fiscal cliff issues are moved toward next year. i do think that will be an ongoing concern for the market along with greece and what's happening in the middle east but technically at least short-term it looks like we can rally over the next four to six weeks. bigger issues will be next year where i think the market has
10:08 am
potential of making a bigger peak sometime next spring but next yeartentially after that could be hairier to say the least after markets rallied for 45 months since march of 2009. we've had a few decent years already even though this has been a tougher year to make money for a lot of people it certainly doesn't feel like market is up 10%. >> do you think next year could be a down year for the 12 months? >> i think that's correct. there are a couple reasons to suggest that. momentum has started to wain. if you look at all stocks and when you look at the surge this year from the june lows, momentum simply did not follow this move to new high territory. longer term cycle suggests that as you approach the election year cycle and had a good years already, it would be more difficult. if you look back as markets tend to peak out and/or bottoms in
10:09 am
months like april happening over the last dozen years. my thinking is that rallies into through the end of the year and potentially next march or april will be a good time to lighten up ahead of ongoing real issues. >> it doesn't always work as this year proved. fascinating stuff. we'll see what happens as we get close to the end of the year. thanks a lot. >> thank you. >> let's get to brian shactman with a quick market flash. >> research in motion trading about 13 million shares. jeffreys upgrading it from under perform to a hold raising price target from $5 to $10 saying blackberry 10 feedback is better than expected. i love this line. we believe blackberry has a 10% chance of success. the stock is up 2.75%. back to you. >> all right. thank you, brian shactman. >> moodies issuing a downgrade of france's credit rating yesterday and eu machine
10:10 am
ministers meeting in greece. >> the write-down makes the rounds today and the company out with earnings. we'll speak in a first on cnbc interview with the ceo of hewlett packard, meg whitman, moments from now. [ male announcer ] the markets keep moving. make sure the news keeps coming with thinkorswim by td ameritrade.
10:11 am
use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account.
10:12 am
10:13 am
israel and hamas exchanging more fire overnight. >> reporter: good afternoon. it's about the diplomatic activity under way right now. indications there may be a truce on the horizon. coming from cairo where egypt's president mohammad speaking to mourners saying egypt was passing through difficult days but there could be light at the end of the tunnel and referred to the truce that may be taking place in egypt. he said that the aggression on gaza would end on tuesday. didn't give details about that agreement. reports coming out of israel citing officials on israel radio that a truce could be announced as late as tuesday night this evening with the arrival of u.s. secretary of state hillary clinton. that's what's happening outside of gaza. here in gaza it still feels like a war footing. in the last couple of hours the iz rally israelis have warned of
10:14 am
imminent attacks on homes and neighborhoods and forcing people to leave their cities and move into central gaza and an indication that a ground invasion may be imminent if a truce is not sealed within the next couple of hours. you can get a sense there's a great sense of fear among ordinary people of gaza that in coming hours it could go either one of two ways. people are hoping it will be a truce but there's no doubt with these types of leaflets and thousands of soldiers amassed on the border, it could be a ominous sign that war is on the horizon. david? >> thank you very much. >> let's head back to headquarters. kate kelly has breaking news for us. >> we just received word that u.s. attorney for the southern district along with enforcement arm of s.e.c. is announcing what
10:15 am
they consider to be the most lucrative insider trading scheme ever charged resulting in benefits to a hedge fund of more than a quarter billion dollars. that's billion with a b. the name of the hedge fund does not immediately seem to be apparent. it's a hedge fund with officers in new york and connecticut and this case centers upon a gentleman who was arrested by the fbi at his florida home this morning. he allegedly got inside information about an alzheimer's drug on trial in 2006 and 2007 being conducted jointly and he passed on that information to said hedge fund resulting in the ill gotten gains and in the process committed securities fraud among other accusations. we'll bring you more details as we have in this news just out this morning and there's a press conference later today at about 12:30. we'll bring you details. >> all right. already a busy month. thank you for that. we'll see you later on today. big box retailer best buy
10:16 am
reporting weaker than expected numbers just days before the unexpected start to the holiday season. for how much longer will it cut into profits? you won't want to miss what meg whitman has to say about that quarter and the autonomy write off at 10:40 eastern time. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong.
10:17 am
tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan. tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world tdd#: 1-800-345-2550 as if i'm right there. tdd#: 1-800-345-2550 and i'm in total control because i can trade tdd#: 1-800-345-2550 directly online in 12 markets in their local currencies.
10:18 am
tdd#: 1-800-345-2550 i use their global research to get an edge. tdd#: 1-800-345-2550 their equity ratings show me how schwab tdd#: 1-800-345-2550 rates specific foreign stocks tdd#: 1-800-345-2550 based on things like fundamentals, momentum and risk. tdd#: 1-800-345-2550 and i also have access to independent tdd#: 1-800-345-2550 firms like ned davis research tdd#: 1-800-345-2550 and economist intelligence unit. tdd#: 1-800-345-2550 plus, i can talk to their global specialists 24/7. tdd#: 1-800-345-2550 and trade in my global account commission-free tdd#: 1-800-345-2550 through march 2013. tdd#: 1-800-345-2550 best part... no jet lag. tdd#: 1-800-345-2550 call 1-800-790-3801 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get started today. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery.
10:19 am
>> the euro slightly lower this morning as eu ministers meet to discuss a greek bailout. ben bernanke set to talk hours from now in new york city. andy, good to see you. we're talking euro/u.s. dollar here. there's obviously two sides. there's hope of a greek deal and there's hope of an aversion to the fiscal cliff. how does this tip in your view?
10:20 am
>> i think there's a lot of what we call in chicago a lot of hopium out there. hope for avoiding the fiscal cliff, hope for peace in the middle east and you can toss in hope for cure for cancer. the market has been rallying on this over the last 24 to 48 hours. to me i don't like what's going on overall and i think we'll see maybe just a little bit more risk on over the next maybe 24 hours. i want to take an opportunity to sell that risk at that point. >> all right. what levels are we talking about? we're talking about selling euro/u.s. dollar i presume and you're waiting for euro to go higher. >> we're just trading below my entry point. i want to sell at 128.25. tight stop at 128.75. i look for a decent size move back down to 125.75. my whole thought on this is that the debt negotiations and the cliff negotiations in the united
10:21 am
states have not even really started. we had a handshake and constructive slap on the back by boehner and obama and that's going to fade next week when they actually get into the details of what they have to come up with. there will be acrimony and disagreement. that's what i want to take advantage of when we see a rally and risk this week, i want to sell it and think next week we come back to reality. >> basically this is more of a u.s. dollar driven trade opposed to what's going on in europe. >> yeah. that's true. i also -- you can toss in there we had the downgrade of france even though s&p downgraded earlier this year and moodies did it this time. we'll see articles over the next tl three to four days and over the weekend with problems with the bailout facility when there's not enough aaa rated countries in there. you'll see more negative news out on that. >> good to speak with you. andy bush. for more currency trades, watch
10:22 am
"money in motion." we're off this friday but back next friday. you can get your fix online. >> we are awaiting a speech from fed chairman ben bernanke later today. we'll have a preview and analysis of what traders are expecting to hear and what the markets want to take away from it and want you to note the banner at the bottom of our screen in terms of xstrata deal being approved by shareholders. a lot of debate about retention packages. huge retention packages being paid. those have not been approved by shareholders. all right. moving on we're going to have hp news. we've had plenty of it this morning, haven't we? a huge write-off at autonomy. hp overpaid a lot for it. and not to mention guidance for the remainder of the year or for the first half of next year. we have lots to talk with meg whitman about. that is coming up about 15 or so minutes from now. [ male announcer ] introducing the new dell xps 12.
10:23 am
part of a whole new line of tablets from dell. it's changing the conversation. ♪
10:24 am
it's changing the conversation. well, if itmr. margin?margin. don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups? you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know.
10:25 am
>> this is going to be one of the first economic speeches the chairman has given. you may hear a little bit about
10:26 am
housing in the speech today. we had decent housing numbers this morning. overall theing sector has been on the rebound. we'll hear an overall sense that the economy is improving modestly but no change in policy. why? because general fed policy is really set for a while. the only specific question is what happens when operation twist ends just to remind you the fed sells short-term securities and buys long-term securities to drive down long-term rates. the expectation is that when $45 billion of twist comes off, the fed will begin outright purchases. in other words, more qe on top of 40 billion of mortgages it's already buying probably buy more treasuries at that end and the fed continues to debate guidance. overall, i think the federal reserve is happy with what's happened with mortgage rates. might have expected more of a decline if you look at the chart of the 30-year mortgage rate what you see is that it has come down since the fed made clear it would buy mortgages back at the
10:27 am
fed's jackson hole suites. it's been relatively even because of twists and mortgages haven't come through and there's the 30-year fixed mortgage rate. i reversed that. sorry. it's come down a bit. you can expect it might come down a bit more. some guys said that maybe we could get a handle on mortgages. overall the federal reserve thinks its been supportive of the housing market and that the housing market is key to bringing back a lasting and sustainable recovery. one other message i'm sure the federal reserve chairman will provide is to urge lawmakers to solve the fiscal cliff problem and put the finances of the nation on a sustainable path and i believe he'll remind the lawmakers that the federal reserve no matter what it does with qe cannot undo the effects of the fiscal cliff. >> steve liesman thank you for that. >> got breaking news here from former autonomy ceo mike lynch. kayla tausche is back at headquarters. >> of course we know the news coming out of hp this morning. former ceo mike lynch who sold
10:28 am
the company to hp called those statements allegations and said the former management team of autonomy was shocked to see the statement today and flatly rejects these allegations which are false. former ceo lynch called hp's due diligence extensive. it also closes by saying it took ten years to build autonomy's industry leading technology and it's sad to see how it's been mismanaged since its acquisition by hp. back to you. >> all right. the arrows have started flying in both directions. very interesting. don't think we're going to sylvia quite yet. >> we'll wait on that. we're going to head to break. shares of research in motion seeing a rise in today's session after jeffrey's upgraies upgrad hold. we're going to talk to the analyst behind the call in just a few. first --
10:29 am
>> hewlett packard earnings are out and who better to discuss all of the details than the ceo meg whitman herself. >> you have a management team now who has a handle on the problems who knows what to do. we've got a plan to fix this company. >> we'll find out how that plan is coming along next on "squawk on the street." 56 ♪ [ male announcer ] the mercedes-benz winter event is back, with the perfect vehicle that's just right for you, no matter which list you're on. [ santa ] ho, ho, ho, ho! [ male announcer ] lease a 2013 c250 for $349 a month at your local mercedes-benz dealer.
10:30 am
10:31 am
[ female announcer ] today, it's not just about who lives in the white house, it's about who lives in the yellow house, the green, and the apartment house, too. today we not only honor the oval office,
10:32 am
but we honor the cubicle, and the home office as well. because today it's about all of us. and no matter who you are, you're the commander-in-chief of your own life. ♪ finance minister meeting today to take another crack at greece. sylvia? >> reporter: we've just seen ministers arriving here. euro group ministers of course from the 17 euro countries and they want to hammer out the solution for getting the ne35.5 billion euros that are needed because greece is facing the fiscal cliff as we speak.
10:33 am
there were numerous bones of contention. we met last week to sort this out and couldn't quite get there. there was a difference of opinion let's say between the imf and euro group. they said we don't need more time for greece. the sustainability report that puts 20 as the 120% per gdp debt to gdp ratio up there. that should be the one that's reached. euro group said we should give greece more time. two more years were on the table. now we're discussing what exactly can be achieved for the imf and the euro group to come to the same opinion. there are a number of things that could be bargaining chips on the table. one is lowering the interest rate for greek debt could relieve the debt burden. the other one is of course maybe more urgently needed is public sector haircut. we've seen the private sector haircut last year for greece and now of course in order to
10:34 am
relieve the debt burden for this ailing eurozone country, we need to get debt relief from somewhere else and that could only come from the public sector. from the ecb. that's something that can be hammered out tonight. >> all right. thank you very much for breaking that down. >> let's get to best buy this morning. trading sharply lower after third quarter earnings did miss estimates. same store sales also fell more than 4%. david straser is a retail analyst with a buy rating on best buy. price target of 24 it says here, david. i wonder if that's still true today. >> the fair value is under review. obviously these numbers were worse than we thought they were going to be. not actually materially worse. the international part was materially worse than we thought. u.s. part was kind of somewhat in line with where we were. >> how worrisome is guidance on free cash flow? >> it's worrisome. some of that as they explained on the call is related to
10:35 am
inventory and timing of inventory. that's something we have to watch a lot closer. our buy rating has been predicated on the fact they have cash flow which they still have. 800 to a billion dollars is significant. that's before you see a massive cost cutting program begin when the new cfo starts next month and into 2013. and probably this was a tough quarter with -- there was no iphone. that got delayed. people were waiting on windows 8. they definitely had some headwinds on this quarter that should reverse themselves to some degree into next quarter. >> you wrote last week that in the short time there has been a sense of urgency and plans are aggressive and realistic and not awade to look inward and understand mistakes they made in the past and offer solutions. is today's report a reflection of that thesis? >> part of this is them really taking a hatchet to some of the
10:36 am
current operations there and i think when new ceos come in, they clear the deck more aggressively than you would elsewhere and that's part of what we're seeing here today as well. this company is also fighting these takeover rumors and this quasi-hostile bid. it's had an impact for employees across the company. >> how do you think the story with schultz ends? how does that story end? >> probably a deal if it gets done gets done well below that 24 to 26 range, maybe a $20 range. i think that either way the management team that you see in place today could end up very well-being that management team. i think our history -- what we've learned and what we know, i mean, this is putting together a strong nucleus to build off of. >> and finally, you make the point that the conventional wisdom on the company is that everything will be fine if they
10:37 am
can just close enough big stores quickly enough. you don't think that's quite the entirety of the solution. >> well, i mean, i think there are probably some stores that are better off closed than not. the hard part with best buy, one of the challenges, the big stores are for 30 or 40 days a year when they do all their business. one of the things i would say is buy signal today. when people ask me if vendors will cut off best buy. to me the sentiment can't get lower than that and odds of that happening are zero. >> down two bucks today like it was nothing. thanks so much. talk to you soon. breaking news here. let's go back to kate kelly at headquarters. >> a few additional details about insider trading case arrest from the u.s. attorney's office for the southern district of new york. we learned that the defendant involved here is a former employee of s.a.c. capital known
10:38 am
as as a quarter billion dollar of gains relating to inside information on two pharmaceutical companies. he worked at this unit of sac capital. there will be a press conference with more details on this at 12:30. the other thing we've seen is that they did indeed have large positions in the two companies involved in 2008. more on that as soon as we get it. >> all right. kate kelly, thanks for that. >> interesting developing story there. we've got another important story here. my first on cnbc interview with hp's president and ceo meg whitman after the company announces a big write-down on accounting improprieties in part at autonomy, a company it acquired more than a year ago not under ms. whitman's rule. a difficult run nonetheless. meg whitman coming up next. [ female announcer ] the power to become a better investor has gone mobile.
10:39 am
with features like scanning a barcode to get detailed stock quotes to voice recognition. e-trade leads the way in wherever, whenever investing. download the ultimate in mobile investing apps, free, at e-trade. download the ultimate in mobile investing apps, free, if we want to improve our schools...
10:40 am
... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this.
10:41 am
welcome to the world leader in derivatives. welcome to superderivatives.
10:42 am
back to certainly the biggest news of the day. hewlett packard, the largest lagger on the dow now trading at a decade low. the company saying as it released earnings this morning it was the victim of fictitious accounting. ceo of hewlett packard is meg whitman. it doesn't go unnoticed by us that you were willing to come on whether good news or bad and so we certainly appreciate that. i want to get your response actually to some comments that are just out from mike lynch. a gentleman that you fired who ran, founded and ran autonomy, oversaw the sale to hewlett packard. he says "hp's due diligence was overseen by others and due dial generals was extensive and that he rejects these false
10:43 am
allegations flatly." i would love to get your response to that. >> what i can tell you is that after i fired mike lynch for missing q-2 numbers when he was part of the autonomy management team after hp bought the company, a senior accountant on his team came out to tell us about outright misrepresentations and disclosure failures and we launched an investigation, a forensic review of autonomy's financials prior to the acquisition by hp and we believe that there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and mislead potential buyers including hp and we stand by the forensic we view that we've seen and as you know we have turned this over to the s.e.c. the enforcement division of the s.e.c. and the serious fraud office of the u.k. >> what would you say to those that say hp never should have
10:44 am
bought this company but that you are now coming up with reasons as to why its value is not what it once was and not performing well and none of these will rise to the level of outright fraud. they will be things that were not done perhaps as well as they could have been at autonomy. >> obviously we feel there was very serious accounting improprieties and misrepresentations. what i will tell you about autonomy is we still like the business. we like the technology. we think it's going to be an important part of hp software's growth strategy but not as valuable as we had believed it to be because revenues are lower, growth rate we believe will be slower and the margin is not what was reported which was in a 40% to 45% range. we think more 28% to 30% range. as you know when you do a ten-year discounted cash flow
10:45 am
you come up with a different valuation and the price of the write-down that was in excess of $5 billion based on misstated financials when autonomy was a public company. >> you were of course on the board of hewlett packard at the time and agreed that the deal was one that should be undertaken. do you regret that decision on your part and on the part of the board at that time? >> obviously with 20-20 hi hindsight we're disappointed by the news. we relied on audited financials. not brand x accounting firm. and that's what you do when you are on a board. you rely on the recommendations of management and the financials audited by a legitimate financial accounting firm. so obviously we're disappointed. we feel terrible about it. i regret that i voted for this deal. we are where we are and now what we need to do is turn this over to the authorities, seek redress on behalf of hp shareholders to
10:46 am
recruit what we can and then we want to take autonomy business and grow it because it does solve a real need in the marketplace on behalf of customers. there's an explosion of data and there's some very interesting technology that helps companies make sense of all of the data out there in terms of, you know, their marketing plans and other important meeting based compute opportunities. >> nobody expects a board at least my experience would not indicate to me that a board should be expected to have the forensic intelligence so to speak to understand when a company is committing fraud. my word. not a word you guys have used. nonetheless, there were a lot of doubts about autonomy out there in the marketplace regardless in terms of its growth rate and a number of investors who were questioning its accounting. do you recall at all, did that come up in any of the conversation perhaps that the board had at the time who was the ceo? >> not when i was on the board. what i do know is after we
10:47 am
announced the acquisition there were a number of blogs that came to the fore about issue as autonomy. the former management team ran that to ground and came up with a conclusion that there was nothing there. now often in a cutting edge company like autonomy, there will be rumors like this. they went through working with kpmg who hp hired to talk about these issues and talking to mike lynch and they ran it to ground and say there's no there there. obviously we know different now. >> we're watching company stock decline today. hard to say how much is due to autonomy news and how much may be due to investors concerned about the future for the company so let's go there for a moment. you hit the number that analysts were estimating the company would earn for this currently reported quarter. you have lowered guidance for the first half of next year although at the end of the day you're going to make it up in the second half. why do you have confidence that
10:48 am
the second half will be better than the first half of next year? >> first let me say q-4 was a good quarter for hewlett packard. generated $4.1 billion worth of cash, which is more cash than many respected companies like disney and fedex and others reported in their most recent fiscal year and we reduced our net debt position significantly so working hard on restoring our balance sheet. i think people should feel good about that. in addition, earnings were about flat. down 1% on an eps basis which is quite an improvement over the 39% we saw in q-1, 22% and 9% decline in q-3. you can see what we're doing is we're getting our cost structure in line with our revenue trajectory. that's a real accomplishment for the company. as you mentioned, we are confident about our fiscal 2013 guidance from 340 to 360 a share but we guide what we think is realistic for q-1 which is a
10:49 am
tough macro economic environment. a lot of our savings in terms of our savings program will be back end loaded because a lot of that is labor now moving to europe where it is much more difficult to separate people and takes longer and then some of our nonlabor savings we're instituting that executional excellence around skew reduction supply chain and those will kick in in the second half but perhaps most importantly we have some fantastic product coming up and i think i've been clear that companies come in on the backs of terrific products and those will kick in in the second half. >> many would say that they're going to have to. to those that would say what you're really do is managing a declining business because at the end of the day the rise of the tablet is actually the fall of the pc and printing because people just carry this thing around with them everywhere. how do you challenge that assumption that really all you're doing is managing a declining business. you may be managing it well. that's what it is.
10:50 am
>> well, i would say there's two pieces of hewlett packard. there's the printing hewlett-packard. there's the printing and pc business, which the printing business is a flat business. we're seeing increases in enterprise printing and we've got some interesting products coming up in the consumer space. the pc business is a slow growth to declining growth business, but we call that our personal systems group and we're introducing tablets for the consumer as well as the enterprise. we're excited about our elite pad 500. but that's only a portion of our business. 43% of the profits come from enterprise group, our serve e, storage, networking, technology services group that is doing some very interesting things. our storage business is growing double digit. our hyper skill business is growing very fast, so we've got a growth part of this company, then a part that's slower growth
10:51 am
that we're managing for cash, but that's okay. you've got to be smart and again, we've got some great products coming up that will eventually turn the revenue trajectory as a whole. >> but that's a long time. you have made the point this is going to be a long turn around. three years, four years, even five years. i would say sum you still believe that's the case. >> i do. we are one year into a five-year journey. we've said 2013 is a fix and rebuild year and that you will start to see revenue grow again in 2014, as our products hit the market in a really meaningful way. we've made some of those investments in terms of our ability to do business with the challenge. a revamp of our go to market. so i think in 2014, you'll start to see revenue growth, but we have been very clear that this is a journey. it hp didn't get into this situation overnight.
10:52 am
it took a while and it's going to take us a while to get back, but i have to tell you, i feel great about the h p p employee base. and our products. >> but how is you know, i mean, just in terms of their mood right now, watching a stock price at a 12-year low, $22 billion market value on this iconic company seems hard to imagine. i would assume that's got to be affecting moral at this point, not to mention the fact you find fraud in a company you bought a little more than a year ago. >> we've been incredibly transparent in our communications to employees and yes, they're disappointed about the performance of the company, the stock price, but there is a commitment and resilience to hp employees that i think you're going to see us come back here in a very meaningful way and it's not quick. in today's market, people want a quick fix. there is not a quick fix here, but i know when you line up 300,000 hp people against a
10:53 am
mission, i think we're going to deliver here, but we have to manage expectations about how long this will take. part of the way hp got into trouble is short-term fixes that didn't actually lay the foundation for the next five years of hp. and you've got to build for the future here. yeah, could you pump up earnings for next quarter, next year? you could, but it wouldn't lay the foundation for what we must have in terms of the foundation to build the next generation of hp products. >> meg, some critics mikt say introducing a tablet next spring is not layine groundwork for the future. given that the tablet has existed and gained so much penetration. what can you say about the next generation of product? the future product beyond the tablet next spring that hp's got in the works? >> so, with regard to you know, our personal systems group, we've got two tablets,
10:54 am
convertibles, which i think is the next generation form factor. a lot of people want tablets, but most want to end up carrying a laptop plus a tablet, plus a smart phone, so if we can give them a great laptop that is also a tablet, i'm excited about that next generation of form factor and then what you see in january is our tablet design for enterprise. this is a tablet that has a ten and a half hour battery life with its smart jackets, another ten and a half hour battery life. you can service it. you can take off the back and change out the motherboard as well as the screen. we're going to continue to be innovative on our form factors and what consumers and employees want in their personal devices. the need to create, consume and share is not declining. that's actually growing and we've got to have the right form
10:55 am
factors and products. but i am equally excited about the enterprise side of our business in terms of storage and networking. >> to put it bluntly, certainly the last 14 months or so of you running this company has not been easy. is this the worst it's going get? can you make a promise, no more bombshells in terms of accounting and nothing unexpected on the earnings front? >> listen, i know what i know today and i feel good about hp's position. our products, about how we've reorganized ourselves, the investments we've been making, but this is a turn around and turn arounds can be unpredictable. i don't see anything on the horizon. i think we've gotten the bad news behind us, but in a turn around, you never know what's coming at you and i've done a couple of turn arounds in my career and you have to be prepared for the unexpected. i don't see anything today --
10:56 am
>> i would assume in mid may before you learned of this, you probably didn't expect it either? >> i did not. >> did you think at the time, what did i get myself into? >> you know, listen, i knew i was getting myself into a turn around and i did it because i care cared about hewlett-packard, what happened to this country. it's important to the technology industry. to every community in which we do business. i'm proud to lead this great company. we're going to bring this company back, but it's a real challenge, i have to say, and you know, usually things that are worth doing are a challenge and this certainly is one. >> and to those who raise the cry yet again they should break it up, that it's time to just return whatever value is left in this company to shareholder, what would you say? >> i'd say i believe the parts of hp are better together. if we manage our portfolio of assets, printing, pcs, server,
10:57 am
storage and network, we're very conscious about investing prominently for a right return on invest and capital. some businesses for growth. then that's very responsible. there are go to market synergies. supply chain synergies and so i feel that this is the right strategy to keep this business together and my view is we'll see the results of that in 2014. >> all right. well, we will see you i'm sure before then. we appreciate the fact you're willing to come on. thank you again, as always. >> thank you. >> meg whitman, ceo of hewlett-packard. >> more on the bombshell, including commentary from apple ceo. back in two minutes.
10:58 am
[ male announcer ] trading's like a high-speed train.
10:59 am
and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account. or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series
11:00 am
from brother. easy to use. it's the ultimate combination of speed, small size, and low-cost printing. welcome to hour three of -- >> a $10.3 billion deal that closed in october of last year. >> i think we should remember the fiscal cliff is a policy choice. these leaders instituted this system in order to discipline
11:01 am
their actions. and they better make good on that promise to the american public in the next 30 days. >> sticking by the company itself still believes its technology is very strong. >> really? >> just nowhere near worth what they paid for it. hewlett-packard started to suffer the minute they did that deal. zpl you think people are apple are laughing? i feel like i should take the pc and just throw it out. what have i got here? >> then a dell. >> we launched an investigation, a forensic review of autonomy's financials and we believe that there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and this lead potential buyers including
11:02 am
hp and we stand by the forensic review that we've seen. >> that interview hitting on about -- the 207 point rally yesterday. dow giving back about 35. s&p down a couple of points. hedge fund tiger global management giving a big boost of confidence to groupon today after acquiring a 9.9% stake. shares up more than 13% and green mountain coffee naming brian kelly to be the new ceo. the executive hired away from coca-cola where he was recently promoted to president. back to hp, of course, leading
11:03 am
all the news today. just hearing from meg whitman, david, some thoughts on the good face she's trying to put on the company in the wake of this bad news. >> listen, those who believe that hp will survive and thrive in the future will point to meg's ability to communicate with an enormous organization that has 300,000 people. i think you saw some of that there in at least her faith in the company, her belief in this long-term turn around she talks about. that being said, obviously, a very tough day for hewlett-packard, shareholders, many of which are throwing their hands up at this point in part because of the autonomy, misrepresentations and they don't believe that in the second half of the year, despite meg saying so, that the company is going to make up the ground it loses in the first half of the year. >> then when you ask about her game plan, she talks about these products. the first in january, the second in the spring, but tablets have been around for so long at this point, is that really going to
11:04 am
be the foundation for growth for the next five years as this turn around happens? is a convertible tablet going to be enough to reignite sales here. of course she said we're excited about networking and these other businesses. >> and list, the company is generating a decent amount of cash. it's something she came back to. $4.1 billion in this quarter. 10.6 billion through the year at this point. that is not insignificant. she talked about how the costs are more aligned now with the revenues, but that doesn't take away from this overall view that this is a declining business. one that is dealing with with the rise of the tablet and people not printing things the way they used to. >> former management as she just said, knew there were
11:05 am
suspiciouses about autonomy. she cited specifically some blogs that said management looked into some allegations. a lot of shorts chattering about the nature. found nothing there. then said we know different now. >> they ran them to the ground and you have to wonder, jim chenos was so specific on his report on autonomy. he was short of course autonomy, then shipped of that short to hewlett-packard. you wonder if they really did run it to the ground if they would have found them. >> if you misseded the interview, here is meg whitman on the company's bombshell accounting scandal just a few moments ago. >> we've launched an investigation led by pwc, a forensic review prior to the acquisition by hp and we believe there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and
11:06 am
mislead possibly btential buyer including hp and we stand by the forensic review that we've seen and as you know, ef turned this over to the sec, the enforcement division of the sec as well as the serious fraud office in the u.k. >> we've heard from mike lynch, the former head of autonomy. now, from the former head of hp. quote, i'm both stunned and disappointed to learn of autonomy's alleged accounting improprieti improprieties. meticulous and thorough. >> one has to wonder just what that means and meg did point out and mention by name, the firm of deloitte, the auditing firm that signed off on autonomy's numbers. we'll see where this goes. it is certainly early days and they have referred this to the s.e.c. and serious fraud office in the u.k. that is they have referred the findings, hp has, but it's early days for that. it's only been recently they did send it their way.
11:07 am
an investigation is obviously going to continue. we'll see if if it ends up with charges. >> meg did everything she could to not use the word, fraud. she called the misrepresentation outright and willing, but did not go to the fraud word. >> no, i guess that's something we could ask our next guest because harvey pitt's the former chairman of the s.e.c. he's currently the ceo of calirama. why not just refer to it as fraud? given all the words they've used, knowing a bit about what at least they allege, what's your take here in terms of fraud or not fraud? >> it certainly is the plain import of them saying it's froud. the only thing i can think about the perhaps the lawyer's suggestion, that they use some
11:08 am
less assertive words, but the allegation is fraud. the biggest problem i think that hp has though is can explaining its own failure. >> let eat try to separate the blame here. if you're deloitte, how nervous are you today? >> i think deloitte has to be both nervous and girding up for a long battle. i think this is when you have a right to this magnitude, people pay attention and deloitte is going to come under real scrutiny for its certification of financial statements and its failure to find any indications of this kind of fraudulent behavior. >> are you beginning to detect
11:09 am
similarities to arthur anderson? i think there's a huge difference. the anderson situation involved a long string of cases the government has been appropriately chastised by itself and by others for allowing the firm of arthur anderson to disintegrate. there are penalties and steps that need to be taken, but the last thing the global economy needs now is one less big major accounting firm. >> harvey, if i'm a shareholder at home of hewlett-packard, i'm pretty mad now and looking to
11:10 am
the broad and board may not have t resources to detect fraud if it is fraud. at the same time, i know that a lot of blogs out there and notes short sellers raised the flag on autonomy's accounting practices, specifically. could the fraud, could the board be found at fault in any way given there were some people out there who had detected that there could be fraud on the books at autonomy? >> well, i think board's responsibility may well have been focused or should be focused on why the people doing due diligence didn't pursue some of these issues. one of the things that people are going to have to look at are what are the reports to board
11:11 am
got before they approved the merger, but almost the second it was announced, serious questions were raised, both about the viability of autonomy, as well as the question of whether hewlett-packard had overpaid. those questions were so instantaneous that one has to ask where the due diligence was within hewlett-packard. that, to me, is the central concern out of all of this. >> harvey, that's going to happen now to the s.e.c.? it's early days is my understanding in terms of ou they only referred this information to them. not very long ago, but what is going to take place here in your opinion at least giving the facts as we know them? >> well, i think both in the u.k. and in the u.s., the government regulators are going to commence immediate
11:12 am
investigations. they will assign teams of people. they will immediately subpoena documentation and at all of the organizations, hewlett-packard, autonomy and deloitte, people internally in those firms should be issues do not destroy notifications. one of the sad things we noticed after enron was that there were documents destruction programs that took place both at anderson and at enron. that was one thing we were very sensitive to at the world come. >> finally, just for me, harvey, once again, in their statement, they say accounting and proprieti proprieties, misrepresentations to inflate the underlying financial metrics, so, it is
11:13 am
correct to use the word, fraud? >> absolutely. that is all verbage intending to communicate that they were defrauded. >> all right. har thanks so much for joining us. >> my pleasure. >> want to get to the cme group. rick santelli has the santelli exchange for this tuesday. hey, rick. >> good morning, carl. you know, compromise sometimes means a lot, but one thing that has bugged me a bit and that of course is the notion that statistics sometimes compromise reality, now, we know that when it comes to jobs, there has been a lot of information out there and me in particular, if we look at four years in terms of president obama's first term and we look at jobs, if you include the 356,000 benchmark revisions, that doesn't go in the bureau of
11:14 am
labor statistics until february and you look at the fact he has created 194,000 in his four years. that comes out to about 550,000, okay? that's interesting. now, let's think about what we look at when we think of small business. according to the tax policy center, there's about 20, 22 million small businesses and about 3% of those small businesses are affected by agi adjusted gross income at the threshold of 250,000 that is at the epicenter with this ongoing debate. but i guess what i'm saying is 3% of 22 million is no small number and when we look at the amount of small businesses that are impacted by that, we always think percentages, but i will tell you, sometimes, percentages don't really get the picture across. yesterday, moody's took away the
11:15 am
aaa rating of france and their two-year note is trading 14 basis points today. so, when i go on the air, i say you know, it's up four basis points. but when i represent the facts in the most accurate fashion if i said, oh, my god, two-year note yields are up 40% in france. no. of course not. that's why very few people use percentages when they talk about interest rates. especially very short-term interest rates or t bills. how many did we have a few years ago where the rate on a six month or three month bill was under ten basis points. same analogy. so when you take that 3% and think about maybe they're going to not add one employee or not add two employees, all of a sudden, these numbers against the context of how many jobs created in that first term really starts to take a shape that i don't know has been adequately expressed. so remember, it is all about jobs, jobs, jobs and it's the 3%
11:16 am
solution. doesn't seem like much of a solution. carl, back to you. >> don't go too far. talk to you in a few moments. meanwhile, tonight on fast money, i can't imagine what's going to lead the show. >> we'll see what he's doing with it right now. the ceo of dvr, a trust that handles mall operators, so which retailers are signing up the most properties goin into next year and how is the holiday shopping season shaping up and what the maker of sd energy thinks of the big crackdown on these energy drinks. >> you have said this is just the first chapter. >> we're getting stuff as we go along and we'll will reporting it throughout the day as we continue to get statements from the likes of who oversaw the opposition and ran it briefly when it was a part of.
11:17 am
>> statement from deloitte is what i want to hear next. >> still having some meetings regarding that there. thanks, guys. when we come back, john skucull will weigh in on hp. up next though, france getting downgraded. the effect has been relatively muted in europe. back in two minutes. i put away money. i was 21, so i said, "hmm, i want to retire at 55." and before you know it, i'm 58 years old.
11:18 am
time went by very fast. it goes by too, too fast. ♪ but i would do it again in a heartbeat. [ laughs ] ♪ ♪ ♪ ♪
11:19 am
[ male announcer ] 'tis the season to discover the kid in all of us. the memories that last, start with the gifts that last. ♪ enjoy free shipping and great values on your holiday shopping from l.l.bean. is what drives us to broadcast the world's biggest events in 3d, or live to your seat high above the atlantic ocean. it's what drives us to create eco-friendly race tracks, batteries that power tomorrow's cars, nearly indestructible laptops, and the sustainable smart towns of the future. at panasonic, we're driven to make what matters most better. just another way we're engineering a better world for you.
11:20 am
breaking news here. take a look at crude. there are reports surfacing that there will be a cease fire between israel and gaza. 87.31 was the low on west texas. present has fall ben to a
11:21 am
session of 110. again,s citing officials of hamas that there will be an egyptian brokered cease fire that will come into force at midnight local time. we will see. meantime, we'll go to julia boorstin. >> news corp. is announcing it is acquiring a 37% stake in yankees entertainment and sports network, so this deal that's been in the works for a couple of weeks now, news corp. is acquiring a minority stake, now, this deal is subject to major league baseball's approval, but is expected to close. the current owners are goldman sachs and providence equity. my understanding is that news corp. would be buying out providence equity and goldman sachs and that the yankee group enterprises would maintain its stake. we can reassure you that yankees
11:22 am
baseball will stay on the yes network. there is a deal to keep them on through the year 2042. back to wrou. >> gives them lots of time to win more pennants, rings. david faber's stuck onset to talk about this. >> we know that being men of fairly young ages, not to mention it is perhaps the only kind of programming that most people do not dvr. you want to watch it in realtime, therefore, you're more likely to watch the ads. we have seen the bidding soar and this is an important agreement because it will give news corp. the opportunity to take control of the network, believe it did preyears,. so, an important deal for news
11:23 am
corp., which has had an eye open for news corp. certainly one here in the new york area that's so important. >> does raise the question as they have two children to feed. how much love they're going to give to the high flying entertainment group and how much is the publishing side going to get. >> we're not going to see the slit up become effective. i think the it's not going to be until the third quarter of next year perhaps, but they feel already like orphans, if you talk to many people at the slow growth publishing company, this obviously being done from a different part of the company, that one that has the more rapid growth, the one that includes all of the important cable networks. >> seems like everybody's got this. j.c. penny, everyone's try iingo ride these two rails. it's difficult to do. >> it is. and in fact, it's the digital world that is coming in and that they have had to manage so much of the print side, but done a bit better.
11:24 am
just as it is for hewlett-packard and the advent of mobile devices. >> just getting buzzier and busier. >> meantime as we say earlier, hp trading lower. the deal was announced under the former ceo and since then, he and autonomy's ceo have been fired. here's meg whitman on how the company is moving on. >> i know what i know today and i feel good about hp's position. i feel good about our products, about how we've reorganized. turn arounds can be unpredictable. >> that is saying the least. peter, good morning to you. >> good morning. >> first off, just reflections, reactions to the autonomy.
11:25 am
>> we thought this was going to be a mess, but wow, much worse than i thought. we talk today a lot of clients who were short autonomy, then hp took them out. they're all saying we told you so, we find it a little difficult that hp didn't have some idea of what was going on and more importantly, how the rest of their business is really floundering. i would argue that the pc business, printing preside inin in difficulty. >> i'm seeing how long have you had a less than stellar rating on it and how much is there any sign to you at least that you might change your rating if it gets to a more decent valuation? >> there's been a 40% downside. we were a hole awhile before that. as we look at the issues facing hp, we think they're a full year guidance. i can't believe they maintained
11:26 am
it. we would have expected them to take it down after q 1 guidance. we just don't see how it's possible. convertible tablet is not going to cut it. those products exist and are not selling. windows 8 has not been selling. we don't know how they're going to do it. >> do you think at some point for those buying the stock on a lark, enjoying a nice 4% yield, given the cash situation over there, is or isn't the dividend not in my danger right now? >> we would argue as the situation becomes more dire, could be serious danger. they have some big bullet payments that people are forgetting they have to make. there's approximately 10 billion over the next 12 months that has to be paid back. i would argue bondholders are going to demand more interest and if not, as well as some additional security. >> meg has said they hope to recoup what they can, but i
11:27 am
would assume any redress they're able to get through help with the s.e.c. what have you, is that material or not to your larger view of the company? >> the board agreed with this acquisition. they had it on strategic views and it's a bid of a side show. the pc business is in decline and printing business is in structural decline. >> interesting insight. thanks so much for your time today. busy news day. you heard the news here first from faber, then the first comments from meg whitman. >> we believe that there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and
11:28 am
mislead potential buyers including hp and we stand by the forensic review that we've seen and as you know, we have turned this over to the s.e.c. >> with that, john skullly's take. we'll be right back. twins. i didn't see them coming. i have obligations. cute obligations, but obligations. i need to rethink the core of my portfolio. what i really need is sleep. introducing the ishares core, building blocks for the heart of your portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal.
11:29 am
11:30 am
11:31 am
bernanke, hp, you name it. >> two dominant headlines in europe this morning. we think greece may get some money, then the downgrade in france. start with the euro, which got a boost early on and the expectations that we are going to see maybe money for greece. just a half an hour ago, we saw finance ministers beginning their meeting where they expect they will get -- that's what we're talking about, to keep the whole financial system there stable at this point. the other big headline is moody's downgrading france. really take a negative look at france's economy and say it continues to lose come pettiveness and the new president there has doubled down on a lot of the issues that prevent france from growing as fast as it could. doesn't look like it's any worse
11:32 am
for ware for the french stock market because it was widely expected. this is the ten-year by about seven basis points. 2.1%. they have been climbing very studly today. let's go on to the other country making news there this morning. spain was able to borrow a lot of money this morning. more than they expected. so that's the good news. this is the spanish stock market. lower by a quarter of a percent. not a huge move. show you what's going on with the ten-year yield in spain. yes, they were able to borrow more than expected. still, worrisomely elevated is the way to describe spanish -- 5.8% for the ten-year. show you what's going on, we've been talking about potential fraud at a u.k. company. let's tell you about some real fraud that we learned about or was talked about today in the
11:33 am
u.k. the ex-ubs trader was found guilty of fraud, sentenced to seven years in prison in connection for the $2.3 billion loss for unauthorized trading. that happening in the u.k. and then credit swis, they are going to whittle down this company into two different divisions. investment banking and also private wealth management. this is to reflect the new regulatory reaelt that all banks face in the world. all higher? spain was lower, but not by much. back to you. >> so nice to have you down here. >> see you at 1:00. >> of course, also overseas, there are reports of an imminent cease fire in the middle east. eamon is in gaza with the latest there. good evening.
11:34 am
can you hear me? there's a slight delay to that spot where he is in gaza. we'll try to get him back in a little bit. in the meantime, take a look at what oil has done after news of that cease fire, at least after reports began. also the israeli sheckle is higher. scott? we're going to take a break. don't go away. can i help you?
11:35 am
i heard you guys can ship ground for less than the ups store. that's right. i've learned the only way to get a holiday deal is to camp out. you know we've been open all night. is this a trick to get my spot? [ male announcer ] break from the holiday stress. save on ground shipping at fedex office.
11:36 am
or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series from brother.
11:37 am
easy to use. it's the ultimate combination of speed, small size, and low-cost printing. a market moving event at 12:00 p.m., when ben bernanke speaks. is hewlett-packard worth more broken up? find out as the stock plunges to a ten-year low and what the feds describe as the most lucrative case ever. carl left you hanging there. >> you're going to have a busy hour, scott, i'll just say that. thanks. as i mentioned earlier, there are reports of a cease fire in the middle east. want to try and get you make to eamon, live in gaza. good evening. >> good evening to you. a short while ago, egypt's
11:38 am
president gave the biggest indication there may be a cease fire announced later today. i've been speaking to egyptian intelligence officials who say talks are still ongoing in egypt. they say they're hoping to have an announcement later this evening, one that could come as early at 7:00 gmt. but egypt's president did say that the so-called aggression on gaza would come to an end by tuesday and israel's radio is reporting that senior officials in the government say a truce has been reached and it could be reached as early as 8:00 this evening with the arrival of secretary of state hillary clinton. but what's happening on the ground here is far from a truce. in fact, the death toll has now climbed over the past seven days to -- palestinians killed as a result of israeli air strikes. within the past several hours, there have been air strikes all across the gaza strip and the military has been releasing
11:39 am
these pamphlets warning citizens and residents of those areas to flee to escape, to move away from their homes, to go into the more densely populated areas in gaza city itself and that is an ominous sign, according to many, that in fact if this truce isn't achieved today and officially declared this evening, that a ground invasion and full blown war could be on the horizon in the coming hours, so there's a great deal of anxiety. a lot of pressure and a lot of diplomatic activity. no one is quite sure how it is all going to pan out in the coming hours. >> certainly all markets around the world trying to figure that exact thing out. thank you so much. live to want in gaza. bob pisani's made his way to post nine here where he started out the day saying housing would lead and it is. >> and i was getting excited about howing and the street agrees with me. housing is leading. it's the sector that's up the most. take a look at the big names here. remember, we did drop a little right after the elections and
11:40 am
after concerns about mortgage interest, but 6%, that's a lot. you see everything's up roughly 5% on the day. let's take a look at what's going on. it's the housing starts number that's really exciting. best since july of 2008. and remember, here's your all time high. long time ago, january 2006, 2.2 million, today, we're at 894,000. believe it or not, that's an upward slope and moving in the right direction. we're going to hit 1 million probably in the middle part of next we're. the important thing here, existing home sales also moving in the right direction here. they were out yesterday. they're up 11%. there's your old high. 7 million, now, 4.8 million. remember, the trend line is moving in the right direction and that's the kind of thing we like to see. let's look at the numbers for home building sentiment. we had that out yesterday as well here.
11:41 am
46. that was well above expectations. look at that trend line. that was the historic high. the trend keeps moving to the upside. that's what we're looking for. dr horton was talking about last week the idea that october and november, their orders were continuing to be strong. that's one of the big, big homebuilders. that's been moving to the upside recently. important thing is that the trends are all moving in the right direction. here's why i'm getting excited and watching thinki ining thing. the number of houses for sale are decreasing. four and a half months yesterday. household formations are increasing. home prices are increasing, o y okay, this is what you want to see. these are the trends that are making me more happy about what's going on in the housing market. one final thing, how's hurricane sandy impacting housing starts? it's really not. the bottom line is this on hurricane sandy. it takes cities a long time to
11:42 am
approve permits. it's going to be to happen over one month, two. sandy's new building is likely going to be spread out over several years. t not saying there's no impact in the northeast, but the impact is going to be spread out over a long period of time and i think you'll see it rather muted. none is less, right now, housing is the leader and we're seeing autos also pretty well. there's reason for some optimism on the u.s. economy. >> poulty is still the number one name. thanks, bob. after david faber broke the news here first, we brought you the first comments from meg whitman of hp. >> we're disappointed. we feel terrible about it. i regret that i voted for this deal. >> now, for his first take on the bombshell, john sculley after a break. don't go away. look, if you have copd like me, you know it can be hard to breathe, and how that feels. copd includes chronic bronchitis and emphysema.
11:43 am
spiriva helps control my copd symptoms by keeping my airways open for 24 hours. plus, it reduces copd flare-ups. spiriva is the only once-daily inhaled copd maintenance treatment that does both. spiriva handihaler tiotropium bromide inhalation powder does not replace fast-acting inhalers for sudden symptoms. tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. these may worsen with spiriva. discuss all medicines you take, even eye drops. stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. other side effects include dry mouth and constipation. nothing can reverse copd. spiriva helps me breathe better. (blowing sound) ask your doctor about spiriva.
11:44 am
11:45 am
welcome back with more breaking news on the complaint. the -- i'm sorry, against a former employee of s.e.c. capital. new questions are now circling around. the owner of that hedge fund and specifically some conversations it appeared he had with the defendant in this case in 2008. according to the complaint on or around sunday, july 20th, 2008, martoma e-mailed someone known
11:46 am
as the hedge fund owner. is there a good time to catch up with you this morning, it's important. the two proceeded to have a discussion, a little later that morning on cohen's cell phone. then the following on or about monday, july 21st, instructed the hedge fund owner's senior trader to begin selling the elan position in anticipation of possible good news on a drug elan was developing. this language in this complaint draws questions about whether the founder and owner of sac capital was directly involved in these trades. it's not clear what we knew. he is pointed as someone who may have gone rogue. so, it's quite possible that he
11:47 am
was acting alone. >> kate, obviously, you want to be very careful here, but you're analysis of what you know so far as it relates to cohen himself? >> this is the thing, carl. sac capital has implicated for ef several years now. other employees have been found guilty in some cases for engaging in inside information, but however, up until now, cohen has been able to say look, these were rogue actors. all appear to have left the firm sometimes before charges were brought. we don't know this was cohen and we don't know what he knew about where martoma was getting his information. hopefully, we'll get more clarity at 12:30 with a press conference. >> colliding with a bernanke speech as well. thanks a lot. big day, big news of the day, hp announced it was the victim of
11:48 am
dodgey accounting. here's meg whitman this morning. >> what i do know is after we announced the acquisition, there were a number of blogs that came to the floor about potential issues at autonomy. the former management team ran that to ground and came up with the conclusion there was nothing there. now, often in a cutting edge company, there will be rumors like this, but they went through working with deloitte and kpmg, who hp had tired to talk to deloitte about these issues, as well as talking to mike lynch and they ran it to ground and said there's no there there. obviously, we know different now. >> obviously. here to weigh in first, john sculley, the former ceo of apple. john, it's good to have you back. good morning. >> morning, carl. >> i'd love to get your analysis, your thoughts as to what must be going through meg's mind today and specifically on that notion that management at
11:49 am
the time, they knew they were critics, skeptics and according to her, found nothing there. what's your take? >> i would be asking the question of who was chairman of the audit committee at the time the board made the decision to buy autonomy. looking back in on my ten years as ceo of apple and many years at metro p krrkcspcs, the one t know is revenue recognition is the single most important thing to keep your eye on. as i heard the revelations today, i wasn't thinking so much about fraud, but about gee, these are things which any experienced operating executive would be asking questions about and i'm surprised it didn't come up sooner. >> right, and for those of us who have never served on a board, help us understand how granular it gets. how much are you expected to
11:50 am
know even on the basic points that deloitte or whatever accounting firm you have gives you? >> well, you are obviously loobing to experts and in this case, deloitte. you also look to the head of the internal audit committee, an employer of the company, but reports to the chairman of the audit committee in most corporations and you would be asking the sort of intuitive insights as to what does it mean when you are bundling heart ware with software when you are a software company? when you are taking large amounts of up front license fees and then deferring lower amounts of licensing fees in the out years. why are you giving special incentives to value added resellers so push the software? so, these are sort of questions which aren't about just the
11:51 am
technical legality of the aaudi, but are really just good business judgment questions, which you'd expect any experienced executive to ask. >> so some some are trying to put themselves in the head of high pressure. some suggested they were so hungry for a transformational deal of any kind that they maybe looked past some of the issues coming up. do you look past that board or do you think they're really a victim here? >> i don't have any insight so that because i wasn't there. running a big, high-tech company is not an easy job even in the best of times. what i would say though is that i heard meg's answer to some very tough questions this morning on cnbc. i think the company is really fortunate to have meg whitman as ceo. i knew dave packard. i think he's been extremely impressed to see the leadership
11:52 am
meg is giving, so this is a really tough time for high pressure. it isn't just autonomy. they bought eds. at exactly the wrong time and had to take a big write down. they're in this secular change with pcs and printing. so, it's tough time, but i think they've fot an excellent leader with meg. >> i think a loft people share your sentiment regarding meg. those of us who know her and even the fact she came on today and faced those questions, says a lot about her leadership. >> absolutely. >> but john, long-term, is she there to land this plane in a crash position as softly as or can she really pile at the turn around she seems to have in her head? >> i think you've got to look at it through a couple of different perspectives. first of all, she's doing the smart, short-term things she has to do. she's managing cash and doing that well. she is trying to deal with crisis. she's doing that well. but anyone who's been in the
11:53 am
high-tech world for a long time knows that the real long-term success of technology company is the leadership of its products and hp went on for several years during the previous administration where they chose not to invest in r and d and so meg has a big catch-up job to do. i think hp could surprise people as mobility and cloud become bigger, as we move into the sense era, the nex era after smart phones. there's no reason why hp can't find its innovation roots again and surprise people, but it's going to take several years. this is not a one or two-year turn around. this is a multiyear turn around. >> john, thank you so much for coming on. we'll see you later. f. >> thank you. >> john sculley talking some hp today. still ahead, how does hp or any company prevent something like this from happening again? our task force weighs in, just a moment. of tablets from dell.
11:54 am
it's changing the conversation. ♪ who have used androgel 1%, there's big news.
11:55 am
presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. [ male announcer ] dosing and application sites between these products differ. women and children should avoid contact with application sites. discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or, signs in a woman which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. men with breast cancer or who have or might have prostate cancer, and women who are, or may become pregnant or are breast feeding should not use androgel. serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs.
11:56 am
tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. talk to your doctor today about androgel 1.62% so you can use less gel. log on now to and you could pay as little as ten dollars a month for androgel 1.62%. what are you waiting for? this is big news. want to dig deeper into hp's management woes and how the company ensures something like this never happens again. bill george is the former ceo of medtronic, jeff seinfeld,
11:57 am
gentlemen, we have a doo cyzy on our hands today. >> first of all, i feel sorry for meg, carl, but i think this has gone far enough. 6 billion on eds, 9 billion on autonomy. yes, john sculley's right. you should ask questions. on software deals, there's always a lot of questions. i think this put the panic into a lot of short-term actions. software's 4% of the re knew. they have no strategy. the board has been focusing on short-term fixes. they haven't developed any leaders. four times they've gone outside the company and i think it's time for a change. frankly, i think meg is doing a great job of being honest. 2014 is a long away way and earlier this morning, i think it's time to split the company and acknowledge that pcs and printers are a hardware business. sam did that ten years ago at ibm. it's time to spin it off.
11:58 am
it will be a $60 billion company. get all those corporate costs out of it and run it. you can't replace ten years of not running rnd. it's down to two and a half. i think take the rest. enterprise systems, services, and what's little bit of software there and really try to build that up and try to compete in the system side and then let the printers and pcs get down and be a hardware company and meg can run the hp and can go back to its roots. i think it can work very well, but i don't think we just go on the way we are. >> this one and another one i'm managing for cash. >> and she's right. unfortunately, bill, i think you're two years behind on this one. they have the right person in there as she doesn't have a year
11:59 am
on the job yet and she made a lot of changes. bill, you would be throwing out one of the highest growth areas. that's 14% growth. considerably well there. they've got a lot happening in software. yes, they have been underinvesting in the past in new products. this company's now cash rich. got to give credit and the personal systems, maybe their secular decline, but they've been generating a lot of cash which may have been reinvesting in these businesses. they've got lots of new products coming out now, even in printing. printing has an avalanche of new products coming out. they have the love of big corporate clients and personal trending is down. but corporate's going to be there, be strong. >> gentlemen, i can't believe we're out of time. s

Squawk on the Street
CNBC November 20, 2012 9:00am-12:00pm EST

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

TOPIC FREQUENCY Hp 49, Meg Whitman 24, Us 21, U.s. 13, France 11, Mike Lynch 8, Deloitte 8, Greece 8, Israel 7, Dell 6, S&p 6, Carl 5, Europe 5, Ben Bernanke 5, John Sculley 4, David Faber 4, Sandy 4, Egypt 4, Bob 4, Coca-cola 4
Network CNBC
Duration 03:00:00
Scanned in San Francisco, CA, USA
Source Comcast Cable
Tuner Virtual Ch. 58 (CNBC)
Video Codec mpeg2video
Audio Cocec ac3
Pixel width 528
Pixel height 480
Sponsor Internet Archive
Audio/Visual sound, color

disc Borrow a DVD of this show
info Stream Only
Uploaded by
TV Archive
on 11/20/2012